Professional Documents
Culture Documents
2d 573
1979-1 Trade Cases 62,531
In this appeal we are called upon to apply the teaching of Illinois Brick Co. v.
State of Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), to a
number of settings, all in the context of a series of antitrust actions brought
against manufacturers of consumer bags, alleging illegal price fixing under the
Sherman Act and seeking both treble damages and injunctive relief. Because
none of the plaintiffs purchased bags directly from the defendants, the district
court relied on the holding in Illinois Brick that indirect purchasers from
antitrust violators may not as a general matter sue for treble damages, granted
defendants' motions for summary judgment, and dismissed the suits in their
entirety.
With respect to all the plaintiffs, excepting only Mid-West Paper Products
Company, we agree with the district court that Illinois Brick bars their claims
for treble damages. But in our view such plaintiffs may still seek injunctive
relief. We also believe that summary judgment on Mid-West's suit is
inappropriate at least at this time.
These private antitrust actions were instituted in the wake of a grand jury
indictment charging five corporations and seven individuals engaged in the
manufacture of consumer bags with fixing prices in violation of section 1 of the
Sherman Act.1
The criminal indictment, the language of which was closely tracked in the
complaints filed in the private civil actions, described consumer bags as single
or multilayered paper bags that may also contain linings or coatings made from
other materials and that are employed to prepackage products then marketed in
them. Consumer bags are designed for capacities of less than twenty-five
pounds. They often have printed exterior designs describing their contents and
are used for packaging a variety of products, including pet foods, cookies, tea,
coffee, and chemicals.
Plaintiffs in the civil actions fall into three categories: The first group, which
includes Shopping Cart, Inc., 86th Street Food Specialty, Inc., C. G. Dairies,
Inc. and 3 J's Farms, Inc., consists of supermarkets and retail grocery stores that
do not purchase consumer bags directly from the defendants or from anyone
else, but purchase products that are packaged in consumer bags for resale to
their customers.
6
Named as defendants in these actions are the five corporations listed in the
criminal indictment: Continental Group, Inc., American Bag and Paper Corp.,
Chase Bag Co., Harley Corp., and St. Regis Paper Co. The cases involved in
this appeal as well as other suits were consolidated for trial in the Eastern
District of Pennsylvania, where plaintiffs sought certification to represent a
class, and asked for treble damages and injunctive relief.
The district judge at first limited discovery to matters relevant to the class
certification question. After the Supreme Court's decision in Illinois Brick,
however, the judge requested the parties to show cause why the cases should
not be dismissed because of that precedent. On April 5, 1978, summary
judgment was granted in favor of the defendants on the authority of Illinois
Brick. The order was not accompanied by an opinion. Plaintiffs filed a timely
appeal.
According to Justice White, the author of the Illinois Brick opinion, the result
there was logically compelled by the Court's earlier decision in Hanover Shoe,
Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 88 S.Ct. 2224, 20 L.Ed.2d
1231 (1968). In Hanover Shoe, a company that had illegally overcharged its
customers was sued by one of them for treble damages under 4 of the Clayton
Act.3 It was determined there that as a matter of law an antitrust violator may
not, as a general matter, interpose as a defense that the direct purchaser has not
been injured because it had passed on the illegal overcharge to its own
customers. As described in Illinois Brick, the Court in Hanover Shoe
11 that except in certain limited circumstances, a direct purchaser suing for treble
held
damages under 4 of the Clayton Act is injured within the meaning of 4 by the
full amount of the overcharge paid by it and that the antitrust defendant is not
permitted to introduce evidence that indirect purchasers were in fact injured by the
illegal overcharge. 392 U.S., at 494, 88 S.Ct. at 2232. The first reason for the
Court's rejection of this offer of proof was an unwillingness to complicate trebledamages actions with attempts to trace the effects of the overcharge on the
purchaser's prices, sales, costs, and profits, and of showing that these variables
would have behaved differently without the overcharge. Id., at 492-493, 88 S.Ct. at
2231. A second reason for barring the pass-on defense was the Court's concern that
unless direct purchasers were allowed to sue for the portion of the overcharge
arguably passed on to indirect purchasers, antitrust violators "would retain the fruits
of their illegality" because indirect purchasers "would have only a tiny stake in the
lawsuit" and hence little incentive to sue. Id., at 494, 88 S.Ct. at 2232.4
12
With Hanover Shoe already foreclosing the defensive use of "pass-on" except
in limited circumstances, the Court in Illinois Brick adopted a rule of symmetry
with respect to the offensive use of "pass-on", thereby barring indirect
purchasers from suing for treble damages whenever the antitrust defendant
would be precluded from asserting the pass-on defense against a direct
purchaser.
13
The Court reasoned that symmetry was required to protect defendants from the
serious risk of multiple liability.5 Also, it considered the "principal basis for the
decision in Hanover Shoe " the perception that it would greatly complicate and
reduce the effectiveness of treble damages proceedings if they were to include
an analysis of the price and output decisions of a direct purchaser to determine
how much of the illegal overcharge was absorbed by it and how much was
passed on to be equally applicable to the assertion of pass-on theories by
plaintiffs.6 In sum, Illinois Brick concluded: "Permitting the use of pass-on
theories under 4 essentially would transform treble-damages actions into
massive efforts to apportion the recovery among all potential plaintiffs that
could have absorbed part of the overcharge from direct purchasers to
middlemen to ultimate consumers."7
14
Under Hanover Shoe and Illinois Brick, however, the pass-on theory may still
be used, offensively or defensively, in the limited circumstances when tracing
the interaction of market forces is unnecessary. Of relevance here, and the only
situation clearly delimited by the Supreme Court,8 is an exception carved out
for the situation where there is a pre-existing, fixed-quantity, cost-plus contract
between the direct purchaser and its customer, as well as between all other
parties in the distribution chain from the direct purchaser to the plaintiff, so that
the plaintiff has absorbed the illegal overcharge in its entirety.
15 such a situation, the purchaser is insulated from any decrease in its sales as a
In
result of attempting to pass on the overcharge, because its customer is committed to
buying a fixed quantity regardless of price. The effect of the overcharge is
essentially determined in advance, without reference to the interaction of supply and
demand that complicates the determination in the general case.9
16
Like many Supreme Court decisions that are the product of a system in which
the cases to be reviewed are carefully selected, Illinois Brick not only addresses
the immediate problem presented, it also serves as a guidepost for future
litigation. Accordingly, we frame our response to the issues raised in this appeal
with an eye toward blending with and complementing the themes that have been
accentuated by the High Court. Thus, we must determine first, whether any of
the supermarket plaintiffs qualify under the cost-plus contract exception so as to
be in a position to sue defendants for treble damages. Second, although the
Ratio decidendi in Illinois Brick focused upon the narrow issue of the necessity
for symmetrical application of defensive and offensive use of the pass-on
theory, defendants contend that that decision has broad implications regarding
the general question of standing to sue. Therefore, we are required to assess
whether Illinois Brick bars suits by purchasers from competitors of the antitrust
defendants who allege that defendants' anticompetitive activity made it possible
for their competitors to charge higher prices, thereby injuring plaintiffs. Third,
it is necessary that we ascertain whether indirect purchasers, who may not sue
for treble damages under 4, may nonetheless seek injunctive relief under 16.
plaintiffs, and that therefore they have absorbed the illegal overcharge in its
entirety. Similarly, to prevail on one of its theories, Murray must establish the
existence of cost-plus contracts at each level of distribution. The district court
apparently concluded on the basis of the documents before it that the plaintiffs
could not prove that such contracts existed and that since there was no genuine
issue as to any material fact, the defendants were entitled to judgment as a
matter of law. On appeal, the supermarkets argue that summary judgment was
inappropriate inasmuch as discovery with respect to the merits of the
controversy had not yet proceeded, and since it was still possible for them to
prove that they qualify under the cost-plus exception.
18
Any review of the propriety of a grant of summary judgment at the early stages
of discovery is instructed by an appreciation of the nature of the trial process in
federal courts. The Federal Rules of Civil Procedure are designed "to put an end
to the 'sporting theory of justice,' by which the result depends on the fortuitous
availability of evidence or the skill and strategy of counsel."10 One cornerstone
of this scheme is the discovery apparatus, through which the issues in dispute
may be isolated, defined, and clarified before trial and through which a party
may ascertain what evidence, if any, his opponent intends to introduce on each
issue.11 It has been recognized, however, that the liberal discovery devices still
leave ample room for strategic maneuvering by counsel. Protracted discovery
could be used by a wealthy party to coerce an adversary with limited resources
into submission.12 Also, as the Supreme Court has warned,
19 the extent that (discovery) permits a plaintiff with a largely groundless claim to
to
simply take up the time of a number of other people, with the right to do so
representing an In terrorem increment of the settlement value, rather than a
reasonably founded hope that the process will reveal relevant evidence, it is a social
cost rather than a benefit.13
20
specific facts showing that there is a genuine issue for trial."16 Summary
judgment, when appropriately granted, has been upheld even in antitrust
actions,17 where summary procedures traditionally are "sparingly" used. 18
21
In their effort to forestall final dismissal of their claims for treble damages, the
supermarket plaintiffs are able to adduce only two sets of facts. First, they
direct the Court's attention to the deposition of an officer of Shopping Cart, in
which he stated that Shopping Cart acquires the bulk of its merchandise from its
major supplier under a cost-plus arrangement. Second, the supermarket
plaintiffs point out that Shopping Cart moved to compel defendants to answer
interrogatories and to produce documents that were claimed to be necessary for
Shopping Cart to establish that similar costplus arrangements existed at the
other levels of distribution,19 but that the district court dismissed the suits
without deciding the motion.
22
However, in our view, the record amply demonstrates that there is no genuine
issue regarding the material fact whether there are pre-existing, fixed-quantity,
cost-plus contracts at each level of distribution. Shopping Cart, the only
supermarket plaintiff that even purports to come within the cost-plus exception,
conceded in a deposition of one of its officers that it does not have fixedquantity contracts with its major supplier. Rather, it has only an informal oral
arrangement, and its orders vary and are usually based on consumer demand
during the prior week.20 Indeed, the position taken by the supermarkets and
admitted at oral argument is that it is sufficient for them to prove that there
were pre-existing cost-plus arrangements, and that it is not necessary, nor are
they prepared, to prove that any such arrangements were reduced to a formal
contract or that they were for fixed quantities of goods. This stance is
manifestly not in accordance with the dictate of Illinois Brick.21 Under such
circumstances, plaintiffs may not, consonant with the summary judgment
procedure, insist upon taking a roundabout, lengthy, and costly discovery route
before submitting to the inevitable conclusion that their actions for treble
damages cannot prevail.22
B. Murray's of Baederwood
23
charged that "the alleged conspiracy raised the general price level in the market,
and that non-conspirators sold their product under this umbrella at higher prices
than would have prevailed absent the illegal activity."26 The district court in
State of Washington denied the defendant's motion to dismiss all claims based
on transactions with non-conspirators for lack of standing to sue, holding that
causation was a question to be resolved by the jury and that the alleged injury
was not too remote to support recovery. Applying the "target area" test
established by the Ninth Circuit for 4 standing whether the injury occurred
within the " 'area (of economic activity) which it could reasonably be foreseen
would be affected' by the anti-trust violation"27 the district court concluded that
the purpose and foreseeable consequence of the alleged conspiracy was to raise
the market price of the commodity in question by eliminating competition
among the conspirators.
24
25
Judge Garth, in Cromar Co. v. Nuclear Materials and Equipment Corp., 543
F.2d 501 (3d Cir. 1973), carefully surveyed the development in this Court of
the doctrine of standing to assert a claim for treble damages. He concluded that
the cases previously decided "create no binding test that is determinative of
standing." "(R)egardless of the name given to a particular test or standard," he
continued, the precedents are to be understood as representing a functional
analysis of the factual context presented in each case.
position in the area of the economy threatened by the alleged anticompetitive acts
are among the factors to be considered in resolving standing. No single formula
captures the many considerations involved in determining whether the plaintiff is
one "whose protection is the fundamental purpose of the antitrust laws." In re Multidistrict Vehicle Air Pollution, supra (481 F.2d) at 125.32
27
28
29
Underlying the precepts that guard access to 4 is the recognition that the
treble damage action represents a congressional choice that the antitrust laws be
enforced in large measure by "private attorneys general" who are encouraged to
sue by the prospect of recovering three times their actual damages.37
Accordingly, whether the issue is the definition of injury in 4, or the use of
pass-on theories, or the proper scope of the standing doctrine, the line-drawing
that necessarily takes place is informed by an inquiry into what posture best
effectuates the dual purposes of the treble damage remedy, namely,
compensating victims of antitrust violations for their injuries and deterring
violators by depriving them threefold of "the fruits of their illegality,"38 while at
the same time furthering the overriding goal of the antitrust laws preserving
competition.39 Aside from these basic objectives of antitrust enforcement,
which occasionally are at odds with one another, additional concerns must be
addressed in determining whether antitrust goals would be furthered by
adopting a particular position. Among such concerns are whether a duplicative
or ruinous recovery will result40 and whether resolution of the claim will
unduly complicate the trial by necessitating the pursuing of complex and
conjectural economic lines of causation and effect. 41
30
31
32
33
34
The outcome of any attempt to ascertain what price the defendants' competitors
would have charged had there not been a conspiracy would at the very least be
highly conjectural. As noted in Hanover Shoe, "(a) wide range of factors
influence a company's pricing policies. Normally the impact of a single change
in the relevant conditions cannot be measured after the fact; indeed a
businessman may be unable to state whether, had one fact been different . . . ,
he would have chosen a different price."44 Insofar as cost of production is an
element in arriving at a price, each manufacturer operates at a different level of
efficiency and sustains at least slightly varying expenses, thereby incurring
different costs in creating the finished product. And in addition to actual cost,
pricing decisions are based on various other considerations, such as marketing
strategy and elasticity of demand. Although in selecting a price for its product a
manufacturer must also take into account the market price for comparable
items, to some extent its pricing decisions remain unaffected by the prices
charged by others. This is so because of entry and exit conditions in the
industry, the degree of interchangeability among the products, and time lags in
adjusting to changes in output, price and demand in the market, to name just a
few factors. Thus, the competitors of the price-fixers may well have charged
the same price notwithstanding the conspiracy, and purchasers such as Murray
would be hard pressed to prove otherwise. Indeed, given the fact that
economists have difficulty explaining the patterns of interdependence in any
oligopolistic industry, which itself is invariably a necessary condition for
successful price-fixing, it cannot be said that the noncompetitive pricing
behavior of any manufacturer would not have taken place absent the
conspiracy.45
Apart from its speculative nature, any attempt to determine the effect of
defendants' overcharges upon their competitors' prices would transform this
antitrust litigation into the sort of complex economic proceeding that the
Illinois Brick Court was desirous of avoiding if at all possible.46 And as we
read that decision, it is not only possible but imperative that such a
transformation not occur in the present case. Illinois Brick represents in effect
the proposition that when defendants have fixed prices above the competitive
market price, where the benefit derived by them is readily ascertainable, the
objectives of the treble damage action are fulfilled when the defendants are
required to pay the direct purchasers three times the overcharge.47 As explained
in Illinois Brick, such an award not only deprives the violators of all the "fruits
of their illegality" and deters further wrongdoing, it also compensates those
victims who are most likely to assume the mantle of private attorneys general
for the injuries they suffered. And by concentrating the entire award in the
hands of the direct purchasers in all but unusual circumstances and thereby
giving them an incentive to sue, effective and vigorous enforcement of the
antitrust laws is, so far as the Supreme Court is concerned, for all practical
purposes assured.48 Once direct purchasers are singled out as the group "
'whose protection is the fundamental purpose of the antitrust laws' " in such
non-predatory price-fixing conspiracies and, through them, the objectives of the
treble damage action are fulfilled, there appears to be little reason to expand the
standing doctrine in a manner that would require complex and ultimately
unrewarding economic analyses at trial, particularly where, as here, such
analyses invariably are a prerequisite to establishing that the plaintiff has
suffered compensable injury altogether.49 In fact, given the result in Illinois
Brick, it would be anomalous to permit purchasers from competitors of
defendants who may not have been harmed at all to sue for the competitors'
profits, when indirect purchasers, who always absorb part of defendants'
overcharge,50 may not sue the defendants.
35
36
doctrine of standing, however, is the recognition that the benefits that would
flow from such an alternative are outweighed by its practical consequences.
Thus, the 4 standing doctrine "acknowledges that while many remotely
situated persons may suffer damage in some degree as the result of an antitrust
violation, their damage is usually much more speculative and difficult to prove
than that of (someone) who is an immediate victim of the violation," and that
"if the flood-gates were opened to permit treble damage suits . . . , the lure of a
treble recovery . . . would result in an overkill, due to an enlargement of the
private weapon to a caliber far exceeding that contemplated by Congress."55
These countervailing factors, which have prompted courts to close their doors
to all but those "whose protection is the fundamental purpose of the antitrust
laws," were emphasized by the Supreme Court though in a slightly different
context in Illinois Brick, and we are not free to ignore the thrust of its decision.
C. Mid-West Paper Company
37
With respect to Mid-West, the district court order granted summary judgment
on the ground that Mid-West "did not purchase consumer bags directly from
the defendants . . . . See Illinois Brick Co. v. State of Illinois, 731 U.S. 720 (97
S.Ct. 2061, 52 L.Ed.2d 707) (1977)." On appeal, defendants urge that this order
be upheld for two reasons.
38
First, they maintain that the bags purchased by Mid-West from Great Plains, a
subsidiary of one of the defendants, and resold by Mid-West for packaging
automobile and machine parts, are not consumer bags. In support of this
position, defendants submit that Great Plains does not manufacture consumer
bags, and that Mid-West's purchase orders from Great Plains demonstrate such
fact in that they describe the bags that were ordered either as kraft or as plain
paper bags. Defendants also argue that because Mid-West admits that it is
relying on the government indictment, it is bound by that indictment as well as
by the government's bill of particulars that elaborates upon the indictment. And,
defendants point out, neither of these documents mention the packaging of
machine parts as a use of consumer bags.56 Defendants further contend that
Mid-West has not controverted their affidavits attesting that the bags in
question are not consumer bags, but instead has rested on the unsupported
allegations of its complaint. Accordingly, they assert, Mid-West has not shown
that a dispute exists concerning a material fact so as to preclude summary
judgment.
39
not consumer bags. Indeed, particularly when the portion of the order
addressing Mid-West's claim is compared with other portions of the order, the
inference is that the judge dismissed Mid-West's claim on a legal rather than on
a factual ground.57 In such circumstances, we have no alternative but to remand
the case so that the district court may make a finding as to the nature of the
bags in question. We do not deem the fact that Great Plains is a subsidiary of
Continental Group and describes its product as a kraft or paper bag to be
determinative of the issue. Obviously, a manufacturer may not insulate its
activities from scrutiny by compartmentalizing its corporate organization and
then giving different names to its product, depending on the division that
fabricates it. Nor do we regard Mid-West as being bound by the government's
framing of its criminal case in its bill of particulars. Rather, so long as MidWest is prepared to prove its charges, independent factual determinations must
be made whether the bags bought by Mid-West bear the same characteristics as
the bags described in the government indictment58 and whether a price-fixing
conspiracy existed with respect to the marketing of such bags.59 Finally,
inasmuch as samples of the bags were presented for In camera inspection by the
district court, it cannot be said that Mid-West rested on the allegations in its
complaint and pleadings and did not controvert defendants' affidavits.
40
Defendants' second line of argument is that even conceding that the bags
bought by Mid-West are consumer bags, as a matter of law Mid-West may not
sue for treble damages because it did not purchase the bags directly from any of
the defendants. To the extent that Mid-West bases its claim upon purchases
from competitors of the defendants, we agree that Mid-West has no standing to
sue, for the reasons elaborated upon in our discussion of Murray's cause of
action. But Mid-West also purchased bags from a subsidiary of one of the
defendants, and the possibility therefore exists that it may be entitled to sue
defendants for injuries that resulted from these purchases.
41
"would invite evasion (of the antitrust laws) by the simple expedient of
inserting a subsidiary between the violator and the first noncontrolled
purchaser."61 In contrast, the manufacturer-price fixer in the present case would
not be insulated from suit under the Illinois Brick rule, because Mid-West is a
direct purchaser from Great Plains and may sue it if it participated in this or any
other price-fixing conspiracy. Accordingly, the rationale that underlay our
willingness to disregard the separate legal existence of the subsidiary in Stotter
is not applicable here.
42
43
In sum, then, Mid-West's case must be remanded to the district court for further
proceedings to determine whether the bags purchased by Mid-West are
consumer bags and whether Continental is to be held accountable for Great
Plains' alleged participation in the conspiracy.
Aside from seeking treble damages, the various plaintiffs requested the district
court to enjoin the defendants from continuing to conspire to fix prices. This
request was based on section 16 of the Clayton Act, 15 U.S.C. 26, which
states in part:
45 person, firm, corporation, or association shall be entitled to sue for and have
Any
injunctive relief, in any court of the United States having jurisdiction over the
parties, against threatened loss or damage by a violation of the antitrust laws, . . .
when and under the same conditions and principles as injunctive relief against
threatened conduct that will cause loss or damage is granted by courts of equity . . . .
46
The district court granted summary judgment in favor of the defendants, thus
implicitly holding that injunctive relief was not available to the plaintiffs. Two
lines of argument are now set forth by defendants to support this result with
respect to the supermarket plaintiffs.63
47
Defendants place primary reliance upon Illinois Brick. They interpret that case
as defining who sustains judicially cognizable injury under the antitrust laws,
and contend that if an indirect purchaser is considered not to have suffered
actual injury for purposes of 4, it also must be deemed not to be "threatened"
with injury under 16. Also, defendants assert that the requirement, found in
both 4 and 16, that the injury or damage be proximately caused by the
antitrust violation64 is identical in each section, and that consequently Illinois
Brick's ostensible holding that any injury sustained by indirect purchasers is not
proximately caused by the antitrust violation, is equally relevant with respect to
injunctive relief. Essentially, then, defendants maintain that in light of Illinois
Brick the supermarket plaintiffs lack standing to seek injunctive relief.
48
49
50
The difference between the two sections is reflected in their language as well as
in their judicial construction. Thus, with respect to 4, a body of law has
developed that defines when a person is "injured . . . 'by reason of anything
forbidden in the antitrust laws,' "69 and Illinois Brick is the latest major
refinement of that definition. Similarly, other cases have expounded upon the
requirement that the injury be to the "business or property" of the plaintiff.70
52
53
But no such common basis exists between the use of the pass-on theory in
treble-damage actions and standing to obtain injunctive relief. The concerns
that motivated the Supreme Court to bar offensive use of pass-on centered on
problems created by the treble damage recovery. Obviously, the risk of
exposure to multiple liability, the difficulty in tracing the allocation of the
overcharge among different levels of purchasers, and the general desirability of
symmetrical application of the pass-on theory to plaintiffs and defendants are
wholly unrelated to the issue whether a party should be entitled to sue for
injunctive relief. Nor does the position taken in Illinois Brick, that effective
enforcement of the antitrust laws requires that only direct purchasers be
permitted to sue for treble damages, have validity in the context of 16. The
Court in Illinois Brick concluded that the effectiveness of the treble damage
action would be impaired by allocating the recovery among all those who paid
the illegal overcharge rather than by concentrating the recovery in the hands of
the direct purchasers for in that event no one group would have a sufficient
incentive to sue.79 With respect to injunctive relief, however, the entitlement of
one group to sue does not diminish the incentive of another group to sue. In
fact, enforcement of the antitrust laws is augmented by allowing any individual
threatened by the anticompetitive activity to challenge it. In view of the
markedly different policies upon which 4 and 16 are based, then, we cannot
subscribe to defendants' broad assertion that Illinois Brick defined injury and
proximate causation for purposes of both sections.
54
It should be noted that the element of causation is not at issue in resolving the
question whether indirect purchasers have standing to obtain injunctive relief.
As recognized by Illinois Brick, "in elevating direct purchasers to a preferred
position as private attorneys general, the Hanover Shoe rule denies recovery to
those indirect purchasers who may have been actually injured by antitrust
violations."80 Rather, the question is whether the line for proximate causation
should be drawn at the same place as it was drawn for purposes of treble
damage actions or not.
55
We have already seen that the reasons for adopting a constricted position with
respect to proximate causation in the context of treble damage actions are
inapposite in the context of injunctive relief and that at least one court has
stated that a party may sue under 16 so long as it satisfies the standing
requirements generally applicable in the federal courts. We need not, however,
measure the outer range of standing to sue under 16 in order to decide this
appeal. For unlike other potential plaintiffs, who may be only remotely affected
by the ripples caused by the conspirators' tampering with the supply and
demand curve, indirect purchasers can state unequivocally that under all
circumstances prevalent in the real economic world,81 money is passing from
their hands into the pockets of the price fixers as a result of the conspiracy, and
that no rational pricing decisions by any intermediary will erase this fact.82
56
In determining that indirect purchasers have standing to sue for injunctive relief
under 16 but that each plaintiff must establish its entitlement to such equitable
relief, we have endeavored to chart an approach that preserves the flexibility of
that provision by making the relief it affords available when necessary to
further antitrust policies, yet inaccessible to those who should not benefit from
injunctive relief. Because when dealing with the Sherman Act we are
expounding one of the fundamental laws governing the American economic
system and because Congress has not evinced an intent that its goal of free
competition be treated in an niggardly fashion by the judiciary, such flexibility
appears salutary. Indeed, we believe these efforts to steer a middle ground in
interpreting 16 are in keeping with the Supreme Court's own attitude
regarding the provision:
58
Section
16 should be construed and applied with this purpose (of enforcing the
antitrust laws) in mind, and with the knowledge that the remedy it affords, like other
equitable remedies, is flexible and capable of nice "adjustment and reconciliation
between the public interest and private needs as well as between competing private
claims." Hecht Co. v. Bowles, 321 U.S. 321, 329-330, 64 S.Ct. 587, 592, 88 L.Ed.
754 (1944). Its availability should be "conditioned by the necessities of the public
interest which Congress has sought to protect." Id., at 330, 64 S.Ct., at 592.84
59
We conclude therefore that for purposes of 16, the damages if any sustained
by the supermarket plaintiffs, as indirect purchasers, are proximately caused by
the price-fixers' violations. But although we hold that Illinois Brick does not
preclude indirect purchasers from suing for injunctive relief and that they have
standing to sue under 16, they still must establish, as the statute requires, that
equity principles entitle them to injunctive relief. Because the district court has
not yet had occasion to determine whether the supermarket plaintiffs in the
present case are entitled to injunctive relief under principles of equity, we shall
remand the case for such a determination in the first instance by that court.85V.
60
The judgment of the district court with respect to the supermarket plaintiffs will
be affirmed insofar as it denies them treble damages, but reversed and
remanded insofar as it precludes them from obtaining injunctive relief. With
62
63
Since the determination of whether Murray's and Mid-West have standing must
be arrived at pursuant to a balancing of factors, I will first discuss those factors
that I believe weigh in favor of granting standing here and then analyze why I
believe the factors potentially tilting the balance the other way are either not
present or are outweighed. The first factor to be considered is that the injuries
alleged here will go uncompensated if standing is denied. In other words, there
is allegedly injury in fact. Also any recovery obtained would not be duplicative
of any other recovery which might be obtained. Actual injury, of course, is only
the starting place for standing analysis. It must not be forgotten, however, that
the primary purpose of antitrust damage remedies is remedial rather than
punitive. Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 485-86,
97 S.Ct. 690, 50 L.Ed.2d 701 (1977). Therefore, we must not lightly deny
standing where actual injury is alleged.
64
65
66
67
68
I believe that a similar concern for those who may unwittingly violate the
antitrust laws makes it proper for courts to consider this factor in determining to
whom the antitrust defendant will be held liable. Thus where businesses engage
in practices that might reasonably be considered not to violate the antitrust laws,
it would seem proper for courts, as a matter of fairness, to be most cautious in
extending the scope of their liability once a violation is found. Where, as here,
however, defendants have fixed prices probably the clearest violation of the
antitrust laws and the one most obnoxious to the underlying policy of free
competition considerations of punishment and deterrence warrant the
imposition of broad liability.
69
Among the factors that have led courts to deny standing are the possibility of
duplicative, derivative or windfall recovery. Allowing standing here, however,
would not result in any such recovery. The recovery sought here would not be
duplicative since, as mentioned above, no other party could seek damages for
part or all of the injury claimed here.13 The recovery would not be derivative
since the parties are not related to some other entity at which the illegal
practices are most directly aimed and which could sue in its own right.14 The
recovery could not be properly characterized as "windfall" since the plaintiffs
are complaining of actual out-of-pocket losses.
70
The majority contends that the recoveries even if not duplicative, derivative or
windfall, may well be ruinous, I. e., that allowing treble damages to purchasers
from competitors of antitrust violators might drive the violators out of business
thereby injuring rather than protecting competition. I agree that this is a
concern to be taken most seriously. Because undue reliance on this factor might
seriously undercut enforcement of the antitrust laws, however, I do not believe
that the standing decision should turn on this factor unless there is a very
persuasive basis from which to conclude that competition would actually be
hurt by the allowance of standing. Otherwise courts might unnecessarily
prevent enforcement of the antitrust laws in the guise of protecting competition.
I believe further that there is a strong basis on which to believe that competition
would Not be injured by allowing standing in cases such as this. Only
businesses with a substantial share of a market are likely, by fixing prices, to
significantly affect the prices charged by competing businesses. Thus, it can
reasonably be assumed that there will only be large recoveries against large
companies or a large group of smaller companies who are best able to withstand
such losses. Where companies with a small market share fix prices, the effect
on their competitors would be small and the likelihood of a ruinous damages
assessment would be correspondingly minimal. Thus, the operation of the
market would tend to prevent recoveries in suits such as this from being of a
ruinous or anticompetitive dimension. The majority also indicates that the fact
that the defendants did not directly profit from the plaintiffs injuries here is a
factor to be considered in denying standing. It is clear from the very nature of
the treble damage remedy, however, that recoveries in antitrust cases, as in
many other areas of the law, are not intended solely to force the disgorgement
of tainted profits.15 Therefore, I would accord little if any weight to this factor.
71
Finally, the majority adverts to the complexity of proving damages in this type
of case and, closely related to this, the speculative nature of the inquiry into the
amount of such damages. Complexity and speculativeness, however, are
endemic to antitrust litigation. The length of many antitrust cases is ample
indication of their complexity. It is also well established that damages in
antitrust action need not be proved with the degree of certainty required in most
other areas of the law. See Zenith Radio Corp. v. Hazeltine Research, Inc., 395
U.S. 100, 123-24, 89 S.Ct. 1562, 23 L.Ed.2d 129 (1969).
72
Permitting the use of pass-on theories under 4 essentially would transform treble73
damage actions into massive efforts to apportion the recovery among all potential
plaintiffs that could have absorbed part of the overcharge from direct purchasers to
middlemen to ultimate consumers. However appealing this attempt to allocate the
overcharge might seem in theory, it would add whole new dimensions of complexity
to treble-damage suits and Seriously undermine their effectiveness.
74
75
As already discussed, allowing suits such as those here will encourage rather
than undermine the effective enforcement of the antitrust laws. Where added
complexity does not result in a disincentive to the enforcement of the antitrust
laws, its potency as an argument against standing is seriously diminished.
76
Moreover, there is little reason to believe that proof of damages here will be
significantly more complex or speculative than in a suit by a direct purchaser
against a price-fixing defendant. In each case, the price actually charged is
known. In each case, damages can only be assessed by determining what the
market price would have been "but for" the price-fix. Of course in both cases, it
is possible that the seller would have sold at a price above that of the market
even without the price-fix and presumably the defendant would have an
opportunity to present evidence of this. The only discernible difference is that
the defendant is likely to have better access to proof regarding its own pricing
policies than those of its competitors. This tactical problem of the defendants
does not, however, persuade me that standing should be denied here.
77
Thus I am left with the conclusion that the antitrust policies of compensation
and enforcement would be appreciably advanced by allowing recovery for the
injuries alleged here. I am unconvinced that such recovery would drive antitrust
violators out of the market and thus injure competition. I believe, therefore, that
the balance here is properly struck in favor of granting standing to these
appellants.16
Of the five corporations indicted, two entered pleas of nolo contendere, two
were convicted after jury trials, and one was found not guilty by the jury.
United States v. Continental Group, Inc., 456 F.Supp. 704 (E.D.Pa.1978). In
addition to the criminal actions, the government filed a civil suit seeking
injunctive relief, Civ. No. 76-3377 (E.D.Pa.), and several direct purchasers have
sued for treble damages and injunctive relief
App. 231a
product that incorporated the price-fixed product as one of its ingredients. See
discussion in Part III.C. Infra
9
431 U.S. at 736, 97 S.Ct. at 2070. Under a cost-plus contract a product is sold
at a specified markup above the seller's own cost. The supermarket plaintiffs
submit that this exception should be interpreted expansively so as to permit
recovery even if the pre-existing cost-plus contract does not fix the quantity of
goods to be purchased. Under such circumstances, plaintiffs point out, it is
always true that the illegal profit earned by defendants is traceable in its
entirety to the indirect purchaser. Also, plaintiffs suggest, the exception should
be stretched to include informal arrangements and patterns of cost-plus pricing.
Nevertheless, we are bound by the clear dictate of Illinois Brick and may not
extend the exception beyond the limited circumstances recognized by the
Supreme Court. The Court explicitly rejected any exception for "cost-based
rules of thumb" and other informal arrangements. See id. at 743-44, 97 S.Ct.
2061. Furthermore, the Court has deemed it to be legally significant that when a
cost-plus contract does not specify a fixed quantity of goods, the direct
purchaser may suffer a loss in sales to its customers and seek damages for its
losses, thereby complicating the allocation of the recovery. See id. at 736, 97
S.Ct. 2061. But rather than instruct that whenever a direct purchaser sells under
a variable quantity cost-plus contract, the indirect purchaser to whom the entire
burden of the overcharge is traceable may sue for treble damages in the full
amount while the direct purchaser may sue separately for additional damages
attributable to lost sales, the Supreme Court evidently has concluded that even
in such circumstances, the entire overcharge, multiplied threefold, is to be
awarded to the direct purchaser. The Court's approach is understandable in that
it avoids the complexities that would inevitably result from an alternative rule,
such as that urged by the supermarket plaintiffs, since under an alternative rule,
inquiry would have to be made into each sale consummated by the direct
purchaser to ascertain the terms under which it was made and determine
accordingly who may sue for recovery. Even more important, by adopting a
general rule with a very circumscribed exception the Court has ensured that
under all circumstances there will be an incentive for direct purchasers to sue, a
factor that, in the Court's view, is necessary to promote effective enforcement
of the antitrust laws, See e. g., id. at 734-35, 97 S.Ct. 2061. See Schaefer,
Passing-On Theory in Antitrust Treble Damage Actions: An Economic and
Legal Analysis, 16 Wm. & Mary L.Rev. 883, 916-18, 925-26 (1975); Note,
Scaling the Illinois Brick Wall: The Future of Indirect Purchasers in Antitrust
Litigation, 63 Cornell L.Rev. 309, 329-30 (1978); Note, The Supreme Court,
1976 Term, 91 Harv.L.Rev. 70, 229-30 (1977)
10
8 Wright & Miller, Federal Practice and Procedure 2001 at 18-19 (1970)
11
See, e. g., Hickman v. Taylor, 329 U.S. 495, 500, 67 S.Ct. 385, 91 L.Ed. 451
(1947)
12
13
Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723, 741, 95 S.Ct. 1917,
1928, 44 L.Ed.2d 539 (1975)
14
Fed.R.Civ.P. 56(c)
15
Adickes v. S. H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d
142 (1970); 10 Wright & Miller, Federal Practice & Procedure 2727 (1973)
16
Fed.R.Civ.P. 56(e). See also First Nat'l Bank of Arizona v. Cities Service Co.,
391 U.S. 253, 289, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); Sound Ship Building
Corp. v. Bethlehem Steel Co. (Inc.), 533 F.2d 96, 99-100 (3d Cir. 1976);
Tunnell v. Wiley, 514 F.2d 971, 976 (3d Cir. 1975)
17
See e. g., First Nat'l Bank of Arizona, supra; Sound Ship Building Corp., supra
18
See Hospital Building Co. v. Trustees of Rex Hospital, 425 U.S. 738, 746, 96
S.Ct. 1848, 48 L.Ed.2d 338 (1976); Poller v. Columbia Broadcasting System,
Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962)
19
Shopping Cart sought to compel the defendants to disclose the names and
addresses of all direct purchasers of consumer bags since 1950. It maintains that
this information is necessary for it to ascertain whether any of the direct
purchasers sold to Shopping Cart's supplier under a "cost-plus arrangement", as
well as whether any of the direct purchasers were owned or controlled by the
defendants so as to "establish direct overcharges to the plaintiff which were
unaffected by market forces." App. 558a
20
21
22
Cf. George C. Fry Ready-Mixed Concrete, Inc. v. Pine Hill Concrete Mix
Corp., 554 F.2d 551, 556 (2d Cir. 1977); Donofrio v. Camp, 152 U.S.App.D.C.
280, 283-84, 470 F.2d 428, 431-32 (1972) (both cases indicating that plaintiffs
have no right to continue discovery when suit is groundless)
23
24
25
26
27
Id. at 807, Quoting Hoopes v. Union Oil Co. of Calif., 374 F.2d 480, 485 (9th
Cir. 1967) and other Ninth Circuit cases. Originally, the "target area" test was
framed as encompassing plaintiffs who were within "that area of the economy
which is endangered by a breakdown of competitive conditions in a particular
industry." See Conference of Studio Unions v. Loew's Inc., 193 F.2d 51, 55
(9th Cir. 1951), Cert. denied, 342 U.S. 919, 72 S.Ct. 367, 96 L.Ed. 687 (1952).
The injection of a foreseeability concept into the description of "target area" as
occurred in State of Washington and some Ninth Circuit cases has been roundly
criticized. Thus, for example, Professors Areeda and Turner have observed:
There is something to be said for excusing the defendant from damage liability
for injuries that he neither intended nor could reasonably foresee. The law of
torts often grants that excuse, and punitive treble damages create even more
reason to do so. But query whether all reasonably foreseeable injuries should be
recognized for antitrust purposes. What is foreseeable or even intended is not
necessarily appropriate for antitrust protection.
P. Areeda & D. F. Turner, Antitrust Law P 334d at 165-66 (1978). See also
Berger & Bernstein, An Analytical Framework for Antitrust Standing, 86 Yale
L.J. 809, 835 (1977); Handler, The Shift from Substantive to Procedural
Innovations in Antitrust Suits The Twenty-Third Annual Antitrust Review, 71
Colum.L.Rev. 1, 28-30 (1971)
28
Hawaii v. Standard Oil Co., 405 U.S. 251, 263 n.14, 92 S.Ct. 885, 891, 31
L.Ed.2d 184 (1972). Interestingly enough, while approving the judicial creation
of a treble damage standing doctrine, See id., the Supreme Court has for the
most part abstained from participating in the formulation of its content,
permitting the lower courts to struggle on their own with the difficult task of
identifying the contours of such doctrine. See Berger & Bernstein, Supra note
27, at 841-42
29
John Lenore & Co. v. Olympia Brewing Co., 550 F.2d 495, 499 (9th Cir. 1977).
See also Calderone Enterprises, Inc. v. United Artists Theatre Circuit, Inc., 454
F.2d 1292, 1295-96 (2d Cir. 1971), Cert. denied, 406 U.S. 930, 92 S.Ct. 1776,
32 L.Ed.2d 132 (1972)
30
Cromar v. Nuclear Materials and Equipment Corp., 543 F.2d 501, 505 (3d Cir.
1976), Quoting In re Multidistrict Vehicle Air Pollution M. D. L. No. 31, 481
F.2d 122, 125 (9th Cir.), Cert. denied, 414 U.S. 1045, 94 S.Ct. 551, 38 L.Ed.2d
336 (1973)
31
32
33
Bravman v. Bassett Furniture Industries, Inc., 552 F.2d 90, 99 (3d Cir. 1977),
Cert. denied, 434 U.S. 823, 98 S.Ct. 69, 54 L.Ed.2d 80 (1978)
34
See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 97 S.Ct. 690,
50 L.Ed.2d 701 (1977)
35
36
See Illinois Brick, 431 U.S. at 728 n.7, 97 S.Ct. 2061 (discussing pass-on and
standing). See also Handler, Changing Trends in Antitrust Doctrines: An
See Hawaii v. Standard Oil Co., supra, 405 U.S. at 262, 92 S.Ct. 885
38
See e. g., Pfizer, Inc. v. Government of India, 434 U.S. 308, 314, 98 S.Ct. 584,
54 L.Ed.2d 567 (1978); Illinois Brick, supra, 431 U.S. at 746, 97 S.Ct. 2061;
Brunswick Corp. v. Bowl-O-Mat, Inc., supra, 429 U.S. at 485-86, 97 S.Ct. 690.
See also Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134,
138-39, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968)
39
See, e. g., Northern Pacific Ry. v. United States, 356 U.S. 1, 4, 78 S.Ct. 514, 2
L.Ed.2d 545 (1958); Standard Oil Co. v. FTC, 340 U.S. 231, 249, 71 S.Ct. 240,
95 L.Ed. 239 (1951)
40
See, e. g., Illinois Brick, supra, 431 U.S. at 730-31, 97 S.Ct. 2061; Hawaii v.
Standard Oil Co., supra, 405 U.S. at 262-64, 92 S.Ct. 885; Jeffrey v.
Southwestern Bell, 518 F.2d 1129, 1131 (5th Cir. 1975); Calderone Enterprises
Corp., supra, 454 F.2d at 1295
41
See, e. g., Illinois Brick, supra, 431 U.S. at 731-33, 97 S.Ct. 2061; Hanover
Shoe, supra, 392 U.S. at 492-94, 88 S.Ct. 2224. See generally Berger &
Bernstein, supra note 27, at 845-58 (identifying policies relevant to antitrust
standing)
42
43
In order to recover treble damages, Murray must prove actual causation that it
has been harmed by the defendants' infraction of the antitrust laws with
"reasonable certainty." See Pitchford v. Pepi, 531 F.2d 92, 104-05 (3d Cir.),
Cert. denied, 426 U.S. 935, 96 S.Ct. 2649, 49 L.Ed.2d 387 (1976); Rea v. Ford
Motor Company, 497 F.2d 577, 589 (3d Cir.), Cert. denied, 419 U.S. 868, 95
S.Ct. 126, 42 L.Ed.2d 106 (1974). Once Murray proves that it has been harmed,
"the trier of fact may make a reasonable estimate of damages," Id., though there
reaches a point at which it must be conceded that "even where the defendant by
his own wrong has prevented a more precise computation, the jury may not
render a verdict based on speculation or guesswork." Bigelow v. RKO Radio
Pictures, 327 U.S. 251, 264-65, 66 S.Ct. 574, 579, 90 L.Ed. 652 (1946). See
also Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 160, 122-24, 89
S.Ct. 1562, 23 L.Ed.2d 129 (1969). See generally, P. Areeda & D. F. Turner,
45
46
47
A different problem is presented where prices are fixed below the competitive
market price or where defendants engage in other forms of anticompetitive
conduct, such as group boycotts, vertical restrictions, or monopolization, since
defendants' benefits in those instances are not so readily ascertainable, and may
not be sufficient to compensate "those individuals whose protection is the
primary purpose of the antitrust laws." In such circumstances courts have
awarded damages based upon the amount of injury suffered by the plaintiff
rather than the benefits derived by the defendants. See, e. g., Pitchford v. Pepi,
supra, 531 F.2d at 107-09
48
See 431 U.S. at 745-46, 97 S.Ct. 2061. The Supreme Court noted that "direct
purchasers sometimes may refrain from bringing a treble-damage suit for fear
of disrupting relations with their suppliers," Id. at 746, 97 S.Ct. at 2075, but
concluded that on balance this risk of non-enforcement does not warrant it to
reconsider its conclusion that indirect purchasers are to be barred from suing.
Given the fact that the Supreme Court evidently reached its decision without
considering the possibility that purchasers from competitors could fill this gap
in enforcement, we see no reason to expand upon the Supreme Court's
assessment of the issue by suggesting, as does the dissent, that granting
standing to purchasers from competitors "is one way of preventing that risk of
situation: whereas to establish the amount of damages, the factfinder simply has
to settle on some approximation of the price that would have been charged by
the defendants and their competitors in a competitive market, to establish the
fact of injury, or causation, the factfinder must ascribe specific reasons to a
competitor's pricing decisions and determine that such decisions would not
have been made had one of a number of variables been slightly different. As
discussed in the text accompanying notes 44-45 Supra, this task is difficult to
perform, and indeed may be impossible.
50
51
The dissent attempts to minimize the potentially ruinous effect of such openended liability by suggesting that
(O)nly businesses with a substantial share of a market are likely, by fixing
prices, to significantly affect the prices charged by competing businesses. Thus,
it can reasonably be assumed that there will only be large recoveries against
large companies or a large group of smaller companies who are best able to
withstand such losses. . . . Thus, the operation of the market would tend to
prevent recoveries in suits such as this from being of a ruinous or
anticompetitive dimension.
Infra at p. 598. We are not persuaded by this statement. Although we agree with
the premise that "only businesses with a substantial share of a market are likely,
by fixing prices, to significantly affect the prices charged by competing
businesses," See generally, L. Sullivan, Antitrust 61, 115-17 (1977) we do
not believe that the conclusion that large recoveries will be borne by those
companies "who are best able to withstand such losses" follows from it.
Noncompetitive pricing patterns can prevail under a variety of market
conditions, See generally, Hay & Kelley, An Empirical Survey of Price Fixing
Conspiracies, 17 J. Law & Econ. 12 (1974), and a firm may become an industry
price leader with a remarkable small "substantial" share of the market, simply
because it has a larger share than any other company and is perceived for one
reason or another to be the industry pace-setter. Given this fact, merely because
a company has become an industry price leader, whether advertently or
inadvertently, it does not mean that it can withstand the burdens of a treble
damage recovery that is based upon profits obtained by the rest of the industry.
52
53
See e. g., Illinois Brick, supra, 431 U.S. at 730-31, 97 S.Ct. 2061; Hawaii v.
See, e. g. Cromar, supra, 543 F.2d at 506; Jeffrey v. Southwestern Bell, supra,
518 F.2d at 1131; Calderone Enterprises Corp., supra, 454 F.2d at 1295
55
56
57
The order treats Mid-West's claim together with the claims of the supermarket
plaintiffs that are grouped in the first category, which clearly were dismissed on
the legal ground that such plaintiffs were indirect purchasers. In contrast, in
dismissing the claim of another plaintiff, Sambo's Restaurants, Inc., the next
paragraph of the order states that the dismissal is based "on the ground that the
paper bag (Sambo's) purchases is not a 'consumer bag.' "
58
We note in this regard that paragraph 6 of the indictment did not purport to give
an exhaustive list of uses for consumer bags, which are described in paragraph
5 in the following manner:
Consumer bags, also known in the trade as "small bags," are made from one or
more plies of paper and may be combined with other materials used as linings
and/or coatings. Consumer bags are preformed by the manufacturer in many
styles and sizes according to customer specifications. Most consumer bags have
printed exterior designs as specified by the customer. Consumer bags are
designed for capacities of less than twenty-five pounds. They are normally used
to pre-package products which are then marketed in such bags.
59
We do not at this time address the question whether and in what circumstances
a successful government prosecution would obviate the necessity for Mid-West
to prove a price-fixing conspiracy. See 15 U.S.C. 16
60
61
Id. at 19
62
See, e. g., P. F. Collier & Son Corp. v. FTC, 427 F.2d 261, 266-67 (6 Cir.),
Cert. denied, 400 U.S. 926, 91 S.Ct. 188, 27 L.Ed.2d 186 (1970). See generally,
W. M. Fletcher, Cyclopedia of the Law of Private Corporations 277 (rev. ed.
1969)
63
Apparently, both the defendants and Mid-West are of the belief that Mid-West's
entitlement to injunctive relief is completely dependent upon whether MidWest may sue for treble damages. That assumption overlooks the possibility
that Mid-West may be found to have purchased consumer bags but that it may
not sue defendants for treble damages because Continental Group is not legally
accountable for its subsidiary's sales. In that event the issue would arise
whether Mid-West, as a direct purchaser of consumer bags from competitors of
the defendants, has standing to sue for injunctive relief. Inasmuch as neither
side briefed that issue and since it is presently premature for decision, we
merely note its existence. A parallel issue exists with respect to Murray, but we
need not decide it either, since we conclude that Murray has standing to sue for
injunctive relief in its capacity as an indirect purchaser, and "100 injunctions
are no more effective than one." Hawaii v. Standard Oil Co., supra, 405 U.S. at
261, 92 S.Ct. at 891
64
See Reibert v. Atlantic Richfield Co., 471 F.2d 723, 731 (10 Cir.), Cert. denied,
411 U.S. 938, 93 S.Ct. 1900, 36 L.Ed.2d 399 (1973) ("The aggrieved party
must satisfy the 'by reason of' and/or 'by' requirements found in sections 4 and
16 of the Clayton Act, respectively. This prerequisite boils down to
complainant proving that the antitrust violations are the proximate cause of his
injury.")
65
See Zenith Radio Corp., supra, 395 U.S. at 130-31, 89 S.Ct. 1562; United
States v. Borden Co., 347 U.S. 514, 518, 74 S.Ct. 703, 98 L.Ed. 903 (1954)
66
Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 502, 89
S.Ct. 1252, 1258, 22 L.Ed.2d 495 (1969)
67
See Zenith Radio Corp., supra, 395 U.S. at 130-31, 89 S.Ct. 1562
68
See In re Multidistrict Vehicle Air Pollution M. D. L. No. 31, supra, 481 F.2d
at 130
69
See, e. g., Brunswick Corp., supra; Hanover Shoe, supra; GAF Corp. v. Circle
Floor Co., 463 F.2d 752, 757-59 (2d Cir. 1972), Cert. denied, 413 U.S. 901, 93
S.Ct. 3058, 37 L.Ed.2d 1045 (1973)
70
See, e. g., Hawaii v. Standard Oil Co., supra; Reiter v. Sonotone Corp., 579
F.2d 1077 (8th Cir. 1978), Cert. granted, --- U.S. ----, 99 S.Ct. 830, 59 L.Ed.2d
30 (January 9, 1979); Reibert, supra; Int'l Ass'n of Heat and Frost Insulators and
Asbestos Workers v. United Contractors Ass'n, 483 F.2d 384 (3d Cir. 1973),
Modified, 494 F.2d 1353 (1974)
71
See, e. g., Georgia v. Pennsylvania R. Co., 324 U.S. 439, 65 S.Ct. 716, 89
L.Ed. 1051 (1945); In re Multidistrict Vehicle Air Pollution M. D. L. No. 31,
supra, 481 F.2d at 130-31. See also Hawaii v. Standard Oil Co., supra, 405 U.S.
at 259-62, 92 S.Ct. 885
72
(F)or 16 of the Clayton Act, 15 U.S.C. 26, which was enacted by the
Congress to make available equitable remedies previously denied private
parties, invokes traditional principles of equity and authorizes injunctive relief
upon the demonstration of "threatened" injury. That remedy is characteristically
available even though the plaintiff has not yet suffered actual injury, See
Bedford Cut Stone Co. v. Journeymen Stone Cutters' Assn., 274 U.S. 37, 54-55,
47 S.Ct. 522, 527, 71 L.Ed. 916 (1927); he need only demonstrate a significant
threat of injury from an impending violation of the antitrust laws or from a
contemporary violation likely to continue or recur. See Swift & Co. v. United
States, 196 U.S. 375, 396, 25 S.Ct. 276, 279, 49 L.Ed. 518 (1905); Bedford Cut
Stone Co. v. Journeymen Stone Cutters' Assn., supra, 274 U.S. at 54, 47 S.Ct.
at 527; United States v. Oregon State Medical Society, 343 U.S. 326, 333, 72
S.Ct. 690, 696, 96 L.Ed. 978 (1952); United States v. W. T. Grant Co., 345
U.S. 629, 633, 73 S.Ct. 894, 897, 97 L.Ed. 1303 (1953)
Zenith Radio Corp., supra, 395 U.S. at 130, 89 S.Ct. at 1580 (footnote omitted).
73
See, e. g., id. at 125-33, 89 S.Ct. 1562; In re Multidistrict Vehicle Air Pollution
M. D. L. No. 31, supra, 481 F.2d at 125-31. See also Bogus v. American
Speech & Hearing Ass'n, 582 F.2d 277 (3d Cir. 1978), where we noted that
16
imposes a lower threshold standing requirement than 4 of the Clayton Act. L.
Sullivan, (Antitrust (1970)) Supra at 772. Section 16 has been applied more
expansively, both because its language is less restrictive than that of 4, See
Hawaii v. Standard Oil Co., 405 U.S. 251, 260-61, 92 S.Ct. 885, 31 L.Ed.2d
184 (1972), and because the injunctive remedy is a more flexible and adaptable
tool for enforcing the antitrust laws than the damage remedy, See id. at 261-62,
92 S.Ct. 885; Zenith Corp. v. Hazeltine, 395 U.S. 100, 131, 89 S.Ct. 1562, 23
L.Ed.2d 129 (1969). A party with standing under 4 ordinarily will have
standing under 16. Tugboat, Inc. v. Mobil Towing Co., 534 F.2d 1172, 1174
(5th Cir. 1976); P. Areeda & D. Turner, Supra, 335e.
Id. at 288-89.
74
Jeffrey v. Southwestern Bell, supra, 518 F.2d at 1132 ("(C)ourts take a less
constrained view of standing in suits involving injunctive relief than in those
demanding treble damages. . . . To achieve standing under 16 the petitioner
must demonstrate that he is threatened with loss or injury proximately resulting
from the antitrust violation.")
75
See, e. g., Tugboat, Inc. v. Mobil Towing Co., 534 F.2d 1172, 1174 (5th Cir.
1976) (footnotes omitted):
It is apparent from the language of 16 that the applicable standing rules in
suits to enjoin antitrust violations are the general rules of standing. The plaintiff
need show only that he is threatened by injury proximately caused by the
defendant.
76
The question whether the damage sustained by indirect purchasers has been
proximately caused by the antitrust violators for purposes of standing to sue for
treble damages has, of course, been mooted by Illinois Brick's holding that as a
matter of law indirect purchasers may not sue for treble damages. Prior to
Illinois Brick there existed a split among the various courts of appeals on this
issue. Compare, e. g., Donson Stores, Inc. v. American Bakeries Co., 58 F.R.D.
481, 483-85 (S.D.N.Y.1973) And Philadelphia Housing Authority v. American
Radiator & Standard Sanitary Corp., 50 F.R.D. 13, 30 (E.D.Pa.1970), Aff'd per
curiam sub nom. Mangano v. American Radiator & Standard Sanitary Corp.,
438 F.2d 1187 (3d Cir. 1971), With Illinois v. Ampress Brick Co., 536 F.2d
1163, 1166-67 (7 Cir. 1976), Rev'd sub nom. Illinois Brick Co. v. Illinois, 431
U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977) And In re Western Liquid
Asphalt Cases, 487 F.2d 191 (9th Cir. 1973), Cert. denied, Standard Oil Co. of
Cal. v. Alaska, 415 U.S. 919, 94 S.Ct. 1419, 39 L.Ed.2d 474 (1974). Needless
to say, in view of the different policy considerations reflected in 4 and 16
concepts of standing, these cases are not controlling here
77
78
79
80
81
middleman did not wish to maximize its profits and therefore absorbed the
entire overcharge on its own. See note 50 Supra
82
83
True, as the defendants' argument suggests, once the antitrust violation is being
actively contested by other parties, the interest of the judicial system in
economizing its own efforts comes into play. Similarly, if a defendant is
already enjoined from engaging in the illegal activities, it would be wasteful to
require it to defend another suit seeking to enjoin the same activities once
again, particularly since attorneys fees may now be awarded to successful
plaintiffs under 16. See 15 U.S.C.A. 26 (1978 Supp.). In our view, however,
these considerations do not bear upon the problem of determining proximate
causation for purposes of 16. The "private and public actions were designed
to be cumulative, not mutually exclusive. . . . They may proceed simultaneously
or in disregard of each other." United States v. Borden, supra, 347 U.S. at 51819, 74 S.Ct. at 706. And it would be odd if Congress' recent authorization of
attorneys fees under 16, which was intended to enhance the effectiveness of
private injunctive suits, See H.Rep.No.94-499, 94th Cong. 2d Sess. 18-20
(1975), U.S.Code Cong. & Admin.News 1976, p. 2572, resulted in a
circumscription of the parties eligible to sue. Instead, it would appear that these
concerns are properly to be considered by the court when it exercises its equity
powers to decide whether an injunction is appropriate under the circumstances
84
85
See Bogosian v. Gulf Oil Corp., 561 F.2d 434, 447 n. 6 (3d Cir. 1977), Cert.
denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978)
I take mild exception to the majority's description of how antitrust violators are
to be deterred: "by depriving them threefold of the 'fruits of their illegality.' "
Supra, at p. 583. As will be discussed later, not all antitrust remedies are based
on a calculation of the defendant's ill-gotten profits
As the majority recognizes, Illinois Brick was not, itself, a standing case. I
agree with the majority, however, that the reasoning utilized in that opinion has
implications for standing analysis
See, e. g., City and County of Denver v. American Oil Co., 53 F.R.D. 620, 631
(D.Colo.1971)
See, e. g., Cromar Co. v. Nuclear Materials and Equipment Corp., 543 F.2d 501
(3d Cir. 1976) (rejecting any single test of standing)
See Bogus v. American Speech & Hearing Association, 582 F.2d 277 at 284
(3d Cir. 1978) ("The doctrine of standing as applied to antitrust cases limits the
apparent breadth of this provision by elaborating a concept of proximate
causation between defendant's unlawful act and plaintiff's out-of-pocket
losses."); Bogosian v. Gulf Oil Corp., 561 F.2d at 447 n. 6
10
See generally, Prosser, Law of Torts (4th ed.) 43. The majority criticizes "the
injection of a foreseeability concept" into the determination of standing, at least
with respect to the "target area" test. Supra, at p. 581 n. 27. I believe, however,
that foreseeability is one of the relevant factors that must be considered as long
One formulation of the target area test requires that the plaintiff not only be in
the area, but that he be aimed at. See, e. g., Calderone Enterprises Corp. v.
United Artists Theatre Circuit, 454 F.2d 1292, 1296 (2d Cir. 1971), Cert.
denied, 406 U.S. 930, 92 S.Ct. 1776, 32 L.Ed.2d 132 (1972). Plaintiffs
admittedly would not have standing under such an analysis. This test, however,
has not been adopted by this court, is unduly restrictive and inadequately serves
the purposes of compensation and deterrence
See Handler, supra note 2 at 30
12
13
Although the majority expresses some doubt, I believe it is clear that the logic
of Illinois Brick requires that any recovery by those in the chain of distribution
beginning with defendants' competitors be concentrated in the hands of those
that purchase directly from the competitors
14
15
16
The majority, on four occasions, refers to those " 'whose protection is the
fundamental purpose of the antitrust laws.' " I do not believe that the invocation
of this phrase advances our analysis here. To the extent that the majority
intends this phrase to do more than identify those who are properly allowed